Fiesta makes Ford ‘fida’ about its future

11 Dec 2007


After nearly a decade in the Indian market, Ford India Pvt Ltd seems to have got its Zen right — for a second time. The unprecedented success of the Fiesta has the company ‘fida’ on the Indian market.

The diesel version of the Ford Fiesta, fitted with a Duratorq engine, is rolling out of dealer showrooms fast. As a result, in 2007, Ford India has sold 42,060 units compared to 22,526 units during the same period last year — an overall growth of 87 per cent!

Though the company refuses to give model-wise sales break-ups of the 3,000 to 5,000 units it sells each month, it is clear from the vehicle population on the roads that except for the Ikon and Fiesta, the sales of other models are not anything to write home about, and it is Fiesta that is mostly responsible for the recent bump-up in figures.

Incredibly fuel-efficient
In the incredibly price-sensitive Indian market, say analysts, one of the more important reasons for the Fiesta’s incredible popularity is its low, low fuel consumption.

In the Bosch-Business Standard Motoring Mileage Run 2007, the Ford Fiesta 1.4 Duratorq TDCi diesel emerged as the most fuel efficient car across all categories —. it managed an incredible 25.63 km to the litre on the road, in a mix of city and highway driving conditions.

In the Autocar India Max Mileage Marathon, the diesel Fiesta notched up an unbelievable 31.48 km to the litre, while the 1.4-litre Duratec petrol version could manage 22.43 km to the litre. Only, these figures are from a test track, in optimum driving conditions.

But that’s only half the story. Fit and finish levels on the Fiesta are also several notches above the more thriftily produced Ikon. With an all-aluminium alloy engine, two-stage fuel injection system, electrically operated rear view mirrors, keyless entry, height adjustable seats, anti-lock braking systems, leather upholstery, 6 CD changer, power mirrors, reading lights and a variable displacement AC compressor, the Fiesta is like a Rs10-lakh car, but costs just over Rs8 lakh for the top-of-the-line model.

Little wonder it’s rolling out of showrooms so fast. But, says Scott McCormack, vice president for marketing, sales and service, Ford India, “The company’s $450-million plant has a capacity of 1 lakh cars per annum on a two-shift basis. The present capacity utilisation is 65 per cent.” That means there’s still scope for improvement.

For a long time the wholly owned Indian subsidiary of global auto giant Ford Motor Company was seen as a one-car company. It’s made-for-India Ford Ikon, launched in 1999, was a runaway success. Even today, it continues to be a successful model, rolled out of Ford India’s Maraimalai Nagar plant near Chennai.

The ignition
Ford was the first global car giant to set up production shop in India. In 1995, it partnered with Mahindra and Mahindra to float a company called Mahindra Ford. Later, it renamed the company Ford India.

Recalls Tarun Khanna, general manager for marketing and product planning, “We were seen as the pioneers and the market looked at us positively.” Ford India started out assembling the Ford Escort sold in European markets at its Nashik facility.

The challenge was in adapting the product for Indian conditions. This meant working on the air conditioner, the rear seat alignment, suspension and other areas, so the Escort would suit the Indian roads.

Initial market reception for the Rs7-lakh Escort was encouraging. Tennis star Leander Paes was the brand ambassador. But, two years after its launch, demand for the model began to taper. The company had sold just over 15,000 units.

Birth of an Ikon
Suitably chastened by a market that was too savvy to lap up old western car models, Ford decided to work from scratch on the wheelbase of the hatchback British Mark V Ford Fiesta — code name BE91 — which was re-engineered into a four-door, three-box sedan designed specifically for India — code name C195 — later branded as the Ford Ikon.

Sold as the ‘Josh machine’ and priced at an attractive Rs4.99 lakh for the base model, it caught the imagination of Indian customers, and was later introduced in other developing countries like Brazil (where it was called the Fiesta Sedan), South Africa, Mexico and China.

Simultaneously, Ford India negotiated attractive sales tax incentives from the Tamil Nadu government, and built a greenfield automobile plant near Chennai. In November 1999, the first Ikon that rolled out of the Maraimalai Nagar plant was bought by N Srinivasan, managing director of India Cements. Fittingly, the model has since firmly cemented its place as Ford India’s flagship model.

For some time the company even sold a diesel model with an engine sourced from Hindustan Motors. But it later discontinued the diesel version, and started selling a compressed natural gas (CNG) powered Ikon in select pockets.

Though the model is eight years old, McCormack says, “The Ikon will continue to sell for some more time. We make sure the product remains competitive.” Ford is now positioning the Ikon as an entry-level car for IT professionals, as its EMI works out well.

The year 2001 saw the launch of Ford’s family sedan Mondeo, imported from Belgium and positioned in the luxury car segment in India. Thereafter, a model followed almost every year, with the Endeavour SUV launched in 2003, The Ford Fusion hatchback in 2004 and the Fiesta sedan in 2005.

Also in 2005, Ford bought-out Mahindra’s stakes in the joint venture company, and Ford India became a wholly owned subsidiary of the Ford Motor Company.

The three Ps
Industry watchers say Ford India initially got the three Ps — product, pricing and positioning — wrong for the Indian market. The Escort was a mid-sized car in a small-car market, they say, citing the relative success of Korea’s Hyundai Motor’s Santro and India’s Tata Motors’ Indica as examples of those who got their product right.

Interestingly, like Ford India, Hyundai too got identical sales tax incentives from the Tamil Nadu government to house its plant at Irrungattukottai near Chennai. But unlike Ford, Hyundai profited immensely from the sales tax incentives because of high sales volumes.

But McCormack strongly disagrees, and says one cannot compare sub-compacts with sedans. “Over the years the Indian market will become more or less like the other developed markets with higher sales of mid-sized cars,” he says. A Ford dealer says the Ikon, aimed at Maruti Esteem’s market share, was the right product despite being a mid-sized sedan.

Pricing is the other P that Ford India seems to have got wrong initially. Dogged by poor sales of its hatchback Fusion petrol model, the company slashed its price drastically by nearly Rs60,000 from the launch levels. The model is now available at Rs5.6 lakh (ex-showroom) in Delhi. The Mondeo was launched at a price point of over Rs16 lakh, but is now available for around Rs14 lakh.

McCormack has a different view. Fusion, he says, is a niche product and was marketed aggressively. The diesel version is doing well and has a waiting list of six to eight weeks. But he says there are no plans to re-introduce a diesel Ikon. “Pricing and positioning of a product is a function of the product’s features vis-à-vis the competition. Our products have better features and are appropriately priced,” he argues.

In positioning, the Fusion campaign was said to be confusing. At the time of its launch the Fusion was termed as an ‘urban activity car’. This was later changed to an ‘anything karega car’ for the travel loving family. However, others have gone through this earlier, including the Maruti Van, which was a non-starter until re-positioned as the Omni. Says Khanna, “Fusion owners look for practical usage, and we refined the positioning as a practical, no-nonsense car.”

Who needs celebrities?
The competition ropes in popular film stars as brand ambassadors, Hyundai has Shahrukh Khan, while General Motors (GM) has Rani Mukherjee and Saif Ali Khan. But Ford India follows a different strategy.

The only high-profile brand ambassador Ford India has used is Abhishek Bachchan for the Fiesta. Though the Fusion was endorsed by film star Rahul Bose, the campaign featuring him was not high-pitched.

“We used Bachchan for Fiesta for two reasons. It was a new name plate. Besides, we wanted the image of the brand ambassador to rub positively on the product,” says Khanna. But, he points out, Bachchan’s contract was not renewed after a year, as Fiesta stabilised in the market place.
Endeavour after its latest refurbishment, is now being positioned as a family sports utility vehicle. “Young Indian families today would like to travel together to different destinations, not just to their native place,” remarks Khanna.

Happy dealers
The success of Fiesta and the continued market response for Ikon is attracting new entrepreneurs to take a Ford vehicle dealership. “There were surrenders in our dealerships earlier, but there wasn’t any one particular reason for that. With the success of Fiesta we are getting new enquiries,” says McCormack.

Ford India has 125 dealers across the country, and plans to add five more before the end of this year. Says S Ravindranathan, managing director, MPL Ford, Chennai, “Ford India is concerned about the viability of its dealerships. We had trainers from Ford Australia, talk to dealers on accounts, finance management and other areas.” He says Ford is the only company in India to have two successful models in the mid-sized C segment.

Earlier, poor after-sales service used to be a sore point for Ford owners. When complaints starting to mount, McCormack cracked the whip. He says quality care has been brought to the service stations. “The customer handling process have been simplified. Nearly half of the Ford vehicles on the Indian roads have signed up for annual maintenance contracts,” he says.

Looking forward
But certain dealers are getting impatient. Ford, they say, is slow in launching new models. At the industry level, sales growth is by new models, and not old models.

The low-cost Mahindra-Renault Logan is now becoming a serious threat for the Ikon, while the Fiesta has to compete with the Honda City, Hyundai Verna, Maruti Suzuki Sx4 and General Motors Aveo.

Other players are now talking about capturing at least a 10-per-cent market share by offering different models of vehicles that cover all price points. Many have started talking about making a small car in India.

Ford India dealers too have started demanding that the company come out with a car in the Rs2 lakh to Rs3-lakh band. They would also like to have a model at the Rs10 lakh price point.

Here, compared to Ford India, the other American giant General Motors (GM) is better placed. Thanks to the acquisition of Daewoo Motors, Korea, General Motors has started selling small car Spark in large numbers. Both Tata Motors and Renault have announced plans to make a car at the Rs1-lakh price point.

Asked whether the company has any plans of rolling out a models on an existing platform, McCormack says, “We are looking at that strategy as well. Fiesta is good example of that. The platform existed in Europe, but we changed the body, suspension and engine for India.”

McCormack does not feel that the company is handicapped without a small car in its portfolio. “We want to be the mid-sized segment,” he says, adding, “In the long term we will be in larger segments.”

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